Welfare

Poverty has many causes. The subject is studied by economists, sociologists, historians and epidemiologists, as well as increasingly, psychologists, cognitive scientists and even geneticists. And the idea that the government has to do more than redistribute income to improve children’s “life chances” has been apparent for a long time, too. Under Tony Blair, the UK set up task forces and policy units charged with addressing the “multidimensional” nature of poverty in 21st century Britain.

I think one reason why Iain Duncan Smith irks many policy wonks is that it can often seem that he believes he was the first politician to figure out that poverty is about more than money. That, and because having a deep belief in the rightness of one’s cause is not the same as being right about one’s policies. (A very lefty error, that.) Read more

It is often the little things that, in the final instance, make people visit food banks. Earlier in the year, at two food banks in London, I spoke to several people who explained why they had sought help. Mohamed’s electricity had been cut off, meaning that he couldn’t charge his phone, leaving him unable to receive messages from the job centre, which docked him four weeks of jobseeker’s allowance for missing his appointment. Jack, a driver, had taken a small loan to renew his car tax, but when tax credits weren’t paid as planned, he missed a debt payment and his liabilities rose. Natalie had found a part-time job but there was a three-week gap between some of her benefits stopping and her receiving that first pay cheque.

George Packer has written a fascinating profile of Angela Merkel. As well as revealing the German chancellor’s views on Vladimir Putin, and explaining her cool decision-making process, the New Yorker writer includes this quote from Stefan Reinecke of the left-wing newspaper Die Tageszeitung about Ms Merkel’s views on welfare:

“Half an hour into every speech she gives, when everyone has fallen asleep, she says three things. She says Europe has just seven per cent of the world’s people, twenty-five per cent of the economic output, but fifty per cent of the social welfare—and we have to change this.”

The question raised by Labour’s intervention – and the various Conservative announcements, past, present and future – is ‘where does this end?’ Curbing migrants’ access to condiments, the Paddington Bear movie, Cafe Nero loyalty cards? Contrary to what politicians seem to think, there is no reluctance among Britons to talk about immigration – quite the opposite. The Labour and Conservative parties have talked a lot about migration. They’ve incrementally become tougher on EU migrants’ access to benefits. And has it curbed the rise of Ukip? It doesn’t seem so. Read more

Welfare, migration and Britain’s membership of the EU – three areas of policy that are unlikely to prompt cool thinking. Throw them together, as in the question of which benefits EU migrants should be entitled to, and you have a recipe for opacity.

On Tuesday, a European Court of Justice ruling cleared a few things up. It could – could – make for more comprehensible policy in an area that has been full of confusion, empty rhetoric, and public anger. It will also encourage the prime minister to think he can go further in restricting access to some benefits for some EU nationals, a move he is reportedly considering. This is not because the ruling changed EU law but because it clarified the law, implying that, broadly, the approach successive UK governments have taken is legal.

This week the UK government began sending letters to income taxpayers that suggest how the state spends its citizens’ money. For example, someone paying £10,000 in direct taxes will be told that they are “contributing” £1,900 to public spending on health, which accounts for 19 per cent of state expenditure; £100 to overseas aid, which makes up 1 per cent of spending, and so on (see picture). George Osborne says that by giving people bespoke descriptions of how their contributions equate to spending by various parts of the state, he is increasing transparency.

On the contrary, the chancellor is being opaque. What is pitched as an exercise in numerical transparency is also a lesson in how language confuses public policy.

On Tuesday morning George Osborne was asked by the BBC’s Evan Davis whether he’d rather fund Crossrail 2 or trans-Pennine rail, assuming that both projects had a positive benefit to cost ratio. Politicians tend to shun hypothetical questions but the Chancellor of the Exchequer used this one to make the following argument:

‘I hope we don’t have to make a choice between the two. I think the real choice in our country is actually spending money on this big economic infrastructure, transpennine rail links, Crossrail 2 in London and the like, and spending money on, for example, welfare payments which are not generating either a real economic return and at the same time, are trapping people in poverty.’

Whenever someone mentions what the “real” this or that is, be careful. There are many choices involved in how the British state should spends its tax revenues and indeed what size the state should be in the first place. To reduce them to one “real” choice representing a fraction of overall spend is like saying that the real choice I face is between a Heart of Midlothian season ticket and feeding myself. (Essentials, both.) Read more

In February, I wrote about the increase in the use of food banks. This is a charged issue, not only because of the origin of the lad on the front page of the Daily Mirror.

Charities such as the Trussell Trust argue that more people are receiving food parcels because more people need food. Demand is up, they say, partly due to specific changes to the benefits system made by the coalition government.

The Department for Work and Pensions says the increase is about supply rather than demand. It argues, for instance, that there are many more food banks than there were five years ago and points out that if things are free then people will want them. Media coverage about the issue might also have raised would-be users’ awareness.

On Wednesday, the Trussell Trust released data for the financial year 2013/14.

The pension changes announced at the Budget are explained quite well in the formal consultation document. I like the additional freedom being offered to pensioners. I don’t weep for the injuries to the annuities industry. But I’m worried about the short-termism that could be unleashed and the scope for new charlatans. It is no coincidence that behavioural economics is arguably most useful in pensions policy, when it helps to overcome inherent biases towards undervaluing our lifespans.

One aspect that has been neglected so far is social care – and this could end up being the test of the wisdom of the reforms. Paying for elderly care is one of biggest and fudged issues in public policy. Labour policy is that social care services should be merged with the NHS; thus it would be paid for out of taxation. When the opposition works out what it thinks of the proposed reforms, I’d expect it to talk a lot about social care. Read more

At Wednesday’s Budget, the chancellor announced details of the “welfare cap”, which was first proposed in 2011. This is different from the benefits cap: the limit on the amount one household can receive in benefits per week. The former is a big, potentially sensible idea; the latter is a small, stupid idea.

Mike Brewer from the Institute for Fiscal Studies published a cogent note on Tuesday about the UK government’s “tax-free” childcare. It echoes some of the points I tried to make yesterday about the changes, namely that they are broadly sensible but there is no firm evidence to say that they will do what they are supposed to do, i.e., increase the number of parents in work. There is a big risk that simply subsidising demand will translate into higher sticker costs for parents since the supply side of the market is not working as one would hope of a competitive sector. This is without getting to the argument of whether we should think of nurseries as a market in the first place.

But Mr Brewer makes another important point. A household is eligible for tax-free childcare if the parent(s) are both working and neither receive financial support through working tax credits, or in the future, Universal Credit. What do you need to do to be classified as “working” and therefore ensure that your family gets up to £2,000 in support for childcare? You need to self-certify that you earn £50 per week. No income tax or national insurance is paid at this rate, so it would be hard for HMRC to check. “There will also be a very large incentive for some second earners to claim that they are earning that much: it could be worth thousands of pounds in childcare subsidy”, Mr Brewer writes. Read more

The previous post looked at the changes announced on Tuesday to “childcare accounts”, a subsidy to working parents to help pay for nursery and/or childminders. But for lower income parents, there was a more important change announced regarding Universal Credit, the government’s all-singing, all-dancing, not-yet-working reform to the benefits system, due to be rolled out at some point in the next few years.

Most of the coverage on the childcare changes has focused on the subsidy. But the Universal Credit changes are important and they affect a lot of people: about one half of all households with dependent children will receive UC.

The childcare fix announced today suggests how, in a complex system where rates are being changed from year to year, such disincentives can still emerge. The change sounds simple: under UC, the government will now pay for up to 85 per cent of childcare costs, rather than 70 per cent, as previously proposed. This is why it was necessary:

The rise in demand for food banks is partly related to changes to the benefits system. One of these changes is the toughening of sanctions faced by people who fail to meet one of the conditions for receipt of Jobseeker’s Allowance (a benefit for the unemployed) or Employment and Support Allowance (a benefit for the inactive). Sanctions are a necessary part of any welfare-to-work system but as currently designed they are leading to unnecessary suffering in return for no obvious benefit.

In the year from September 2012 – October 2013, 874,850 sanctions were applied to JSA claimants, a 16 per cent increase from the previous year, and more than double from five years previously. This could have reflected rising numbers of JSA claimants after the recession. But on Monday, a report released by Policy Exchange, a centre-right think tank not renowned for its love of cushy welfare, suggests that a growing share of sanctions are also issued in error.

David Cameron, prime minister, has described his government’s “welfare” reforms as a “moral mission”. I support much of what the coalition is trying to do; for example, the effective marginal tax rate for people such as Natalie should come down under Universal Credit. (It could also have come down without a massive project but that is for another post.) Any government taking power in 2010 would have had to cut the social security budget.

But the government’s haughty self-righteousness is risible in the face of evidence of unnecessary suffering. The rhetoric around benefits and the millions who receive them is already toxic. We could do without the idea that pointing out problems is somehow treacherous. If you look at what the Christian leaders are saying, as this atheist has, they are careful to focus on the practical consequences of specific decisions. There was only one side talking the language of crusade last week and it was not the ones whose job it is to promote the idea of ascension. Read more

One of the many popular myths about immigration is that politicians ignore the issue. On the contrary, they cannot talk enough about how they Share Your Concerns. In this morning’s FT, David Cameron Shares His Concern in a 1000 word op-ed. It has been met with the predictable fiery reactions from all sides of the debate. Read more

In 1894, Mark Oldroyd, a Liberal MP with a fondness for mill girls and justice, published a pamphlet about the living wage. The textiles factory owner from Dewsbury, Yorkshire wrote that: “A living wage must be sufficient to maintain the worker in the highest state of industrial efficiency, with decent surroundings and sufficient leisure”. It was the first formal call for a wage which met the basic needs of a worker and his family. Notably, it was also a deliberate effort to preserve the value and moral worth of work itself. Read more

Help to Work is a both familiar and unfamiliar. Familiar in the sense that it will comprise a relatively small group, mostly men, many in post-industrial towns. It is unfamiliar in that we know too little about why the very long-term unemployed leave JSA, and what makes them do so in the first place. Read more

There might be better ways to spend the money. The policy is also subject to political considerations. (Obviously.) But to see universal free school meals as only a political ploy is to ignore evidence suggesting otherwise. Read more

Universal Credit is the government’s flagship reform to the benefits system. It is also in complete disarray, according to a National Audit Office report released on Thursday. The document is perhaps the most scathing NAO verdict I have read on a large public project. Read more

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John McDermott's blog is a modest attempt to reduce befuddlement. It
features a lot of public policy (and charts) with a smattering of
politics and culture.

John McDermott has been with the FT since 2010. He was formerly the executive comment editor in London and before that a writer for FT Alphaville in New York. Prior to joining the FT, he was a policy adviser in the Downing Street Policy Unit.